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Alibaba seeks to split its shares before the Hong Kong IPO

Participants pass an Alibaba.com display at CES 2019 in Las Vegas.

David Becker | Getty Images

Alibaba plans to split its shares, which it believes could contribute to new fundraising activities.

According to this proposal, the Chinese e-commerce giant will divide an ordinary stock into eight. This would mean that the current number of common shares – which stands at 4 billion – will increase to 32 billion.

Shareholders will vote at the company's annual general meeting to be held on July 15 in Hong Kong. If approved, the stock split will come into effect no later than July 15, 2020, said Alibaba.

Alibaba would be considering an initial public offering in Hong Kong that could yield $ 20 billion.

"The board of directors is proposing the sub-division of shares in order to increase the flexibility of the company in its future capital markets activities," Alibaba said in a statement released on Monday.

"Among other reasons, the subdivision into shares from one to eight will increase the number of shares that can be issued at a lower price per share, and the board of directors believes that this will increase flexibility in engagement activities. new shares, "the statement added.

There are several reasons why companies splitting stocks. One is to increase the number of shares in the hope of attracting new investors. Another solution is to lower the price of each share if a company believes that it has become too high.

When Alibaba went public in the United States in 2014, its shares were listed at $ 68 a unit. Alibaba closed Friday at 158.1 dollars.

Other major technology companies have carried out stock splits. The iPhone maker Apple is one example, which has divided its stock four times since its IPO in 1980.

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